Negotiating leverage

21 October 2011 By Peter Thal Larsen Follow @Peter_TL

Getting more mileage out of the 440 bln euro European Financial Stability Facility is key to easing the euro zone’s debt woes. But the ECB and governments disagree about how to best stretch the fund’s finite resources. Breakingviews offers a road map through the confusion.

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France and Germany disagree over how to bolster the European Financial Stability Facility, reducing the chances of an agreement at the forthcoming euro zone summit, Reuters reported on Oct. 20.
The two countries said in a joint statement that European leaders would discuss a global solution to the crisis on Oct. 23, but no decisions would be adopted before a second meeting to be held by Wednesday, Oct. 26 at the latest.
Key to the dispute are competing proposals to stretch the resources of the 440 billion euro EFSF, which is central to protecting countries like Italy and Spain from the debt woes suffered by the euro zone periphery.
France fears that the country’s triple-A credit rating could come under threat if the wrong approach is chosen.

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